DICK’S Sporting Goods (DKS) short, mcap=$9.2bn, price $116 vs $120

$DKS pitch:
– Post-pandemic means reversion play.
– The sporting goods category has been one of the biggest pandemic beneficiaries.
– The market expects elevated revenues/margins to be sustained due to perceived sticky consumer behavior changes including the adoption of healthy habits and migration to outdoor pursuits.
– DKS still sells want-based discretionary goods subject to waning consumer spending and pull forward.
– The company is on a glide path to normalization where gravity’s just beginning to weigh.

$DKS valuation:
– Trades at 10x consensus FY23 EPS vs 5-year abg 12x NTM EPS.
– With $10bn in revenues and a 9% EBIT margin (+390bps vs 2019), this results in $7.5 EPS.
– Share price target <$80.

Exp. gain: 30% to $80/share

Full DKS write-up (free guest account required):

Leave a Comment